Conservation easements have been a powerful tool to protect land from development, and conservationists are lauding the new tax law for extending enhanced federal tax breaks for donating land development rights through 2013 (and retroactively back to Jan. 1, 2012). That’s good news for land trusts which say that the enhanced incentives have helped farmers, ranchers and other modest-income landowners increase the pace of conservation by a third to over 1 million acres a year.

“Many modest-income donors, particularly farmers and ranchers, really couldn’t afford to donate under the old rules that were in place, and many others never started planning for a donation because they didn’t know what the rules were going to be,” says Russell Shay, director of public policy at the Land Trust Alliance in Washington, D.C. The certainty—at least through year-end—should help spur donations of conservation easements again.

With a conservation easement, you give some or all of the development rights on your land to a government agency or not-for-profit (there are more than 1,700 local land trusts), and you get a federal income tax deduction for the gift (the difference in the value of the land before and after the easement is in place). The size of the parcel can range from just a few acres, such as a pocket nature preserve literally in your backyard, to hundreds or even thousands of acres, such as the 90,000-acre easement billionaire Louis Bacon put on his Trinchera Blanca ranch in Colorado last year. You still own and can enjoy the land—you can continue to farm or fish for instance.

The newly extended enhanced incentive allows a non-farmer donor to use a conservation donation deduction to wipe out 50% of his gross income in any year, up from the normal 30% that is a permanent part of the law. The temporary break also allows a donor to carry forward any unused write-off for a full 15 years, instead of the normal five.

Farmers and ranchers get an even more generous break: They can offset up to 100% of their adjusted gross income with conservation donations, potentially zeroing out their tax liability for the next 15 years. The enhanced conservation easement rules were effective for 2006 and 2007 (championed by Senators Max Baucus, D-Mont., and Chuck Grassley, R-Iowa), and have been extended in one and two-year increments since. Before the latest extension in the American Taxpayer Relief Act in January, they last expired on Dec. 31, 2011, leaving two years of uncertainty.

“It was a confusing time for a lot of donors,” says Stephen Small, a Boston lawyer who specializes in conservation easement donations and is author of a trilogy of books, Preserving Family Lands. Last year folks who could live with the permanent incentives in the tax code went through with donations. Others played a waiting game with Congress.

Now Small says he has clients who were on the fence last year who have decided to go ahead with donations this year given the enhancements. “That’s exactly what they’re for,” Small says. “The enhanced incentives encourage people who otherwise might not be making these donations to make them.”

He predicts more families will be interested in an advanced tax and estate planning strategy, combining the enhanced conservation easement rules with the now permanent $5 million per person gift tax exemption. Families can put an easement on a property and then convey it in trust to benefit younger generations.

One hiccup this year is that the new tax law restored a 3% haircut on itemized deductions; it kicks in on married couples with adjusted gross income of $300,000 ($250,000 for singles). This may hit the ability of some high income folks who donated easement in prior years to use any carryforwards, although it doesn’t affect those who are in the alternative minimum tax. "In some cases, this could work out to be a very nasty, surprising result," says Small. It will also affect a few very high income donors contemplating new easement donations. For a thorough explanation of how the 3% haircut (the “Pease” rule) works from tax lawyer Kaye Thomas, click here.

What about making the enhancements a permanent part of the tax code? That’s the rallying cry of the Land Trust Alliance, an association of 1,700 local and state land trust that promote conservation. “There’s a lot of sentiment in the Congress and the public to make this one of the things that becomes permanent,” says Shay, noting that a bipartisan effort to do so in the last Congress had the support of 311 co-sponsors in the House, and that Congressmen Jim Gerlach, R-Pa., and Mike Thomson, D.-Calif., who both sit on the Ways and Means Committee and were reelected, are back at it.